Secondary Market Research

In Brief

Secondary market research gathers and interprets available information about the target market, and includes published reports, newspaper articles, or academic journals. This method is used to figure out the size of the market or customer segment, pricing, and ways for the market to evolve. Also referred to as “desk research” or “market study,” this type of research is always done using third-party sources, and there is no direct customer contact.

Helps Answer

How much would our customers pay? (What should be the price of our product?)
What is the size of the market? (How many customers would be using our product? How many would be paying customers?)
How much would it cost to sell? (What are the marketing channels and their exploitation costs?)

Description

This method does not refer to primary research such as customer discovery interviews, focus groups, surveys, and so forth. This form of market research is simply the act of seeking out existing research and data.

As the data from secondary research cannot be easily verified and may come from a variety of sources, it is theoretical rather than experimental. Some would consider the data qualitative rather than quantitative because the researcher must factor in the quality of the data source to any conclusions.

The goal of secondary market research is to use existing information to derive and improve your research strategy prior to any first-person research. Often, existing research can help determine rough market sizes and if first-person research is worth the effort. With existing markets, a great amount of information can be found online or purchased from market research consultants.

This type of research can be performed for any market, but is most often done for companies targeting existing markets. There is typically no information available for startups creating new markets.

We distinguish it from Data Mining, which is about exploiting big, numerical data sets (existing or generated by you) so that they can be automatically processed and plotted. We also distinguish it from Picnic in the Graveyard, which is about regarding existing or deceased products in the market rather than the market itself.

First you must find the relevant reports. Then you analyze them in a way that allows you to learn something about your product or idea.

In “market status research," you look at:

User behaviors: How often users need to use a similar product, and in which circumstances (not to be confused with user behaviors regarding specific products, which is covered by the Picnic in the Graveyard method).
Marketing: What are the typical channels used? What are the costs of opening and maintaining such channels?
Current technology: Benchmark technology to understand what kind of standards have been set regarding speed, accessibility, etc.

Identifying relevant reports will help derive target population size, prices, and costs — hence, your revenue.

In “trend research,” you look at:

User behaviors: What new user behaviors are emerging?
Marketing: What new channels are being used in this area?
Technology: What coming technology may disrupt the market and our own approach?

This helps to derive the possible evolution of your revenue and avoid pitfalls, or even give you new ideas (as a generative method).

A typical use of market research is to develop a first idea of the target population itself. For instance, you may want to know if your product would be used more often by teenagers or young adults. Imagine your product is a Facebook app. There are numerous reports about the growth of distinct Facebook population segments and their respective habits, hence you can find if your type of product can meet the needs of younger or older Facebook users, and you can also see if this segment is growing or diminishing.

Time Commitment and Resources

When performed for a particular occasion (to answer a specific question about a market size, for instance, or to get the initial big picture at the beginning of the project), it may take 1-3 days, depending on the difficulty of gathering relevant information, the amount of information that is available, and the filtering of the obtained information.

How to

Where to find useful information:

Libraries
Professional associations
Business groups
Professional fairs
Publications relevant to your target market
Governmental organizations
Public and nonprofit organizations that generate a lot of data (hospitals, transportation systems, etc.)

You must be specific to get information that is relevant to your specific question (i.e., the current status of your idea/product development). For instance, if you want to launch a service that enforces some privacy when publishing images on the internet, look beyond the population of people that publish images on the Internet (which is very large). Figure out who is interested in privacy and takes it seriously. This is not necessarily just a subset of the first population, because there may be people who currently do not publish any images out of concern for privacy issues.

To be specific, you have to be smart, or even crafty. For instance, you may examine annual reports from corporations that may include interesting facts about their target segment within the description of how their products are doing. Another trick is to use tools that are primarily made for other purposes. For instance, by trying to promote something on Facebook (a post, a page, or an app), you can define an ad campaign, then Facebook provides you with tools to target your population (gender, age, device [iPhone or Android], and interests) and displays information about the potentially reached population, which in turn gives you an idea of its size. You do not need to actually launch the campaign and pay for this.

Research into competitors is also a source of information — not just their product, but also their users, marketing channels, prices, and costs (or production methods). This method is generative as well as evaluative, such as in indicating how you could, and when you should, differentiate your product.

Interpreting Results

This method can be quite extrapolative. You may resort to complex resources such as behavioral economics models, but it's better to keep it simple and allow the most space for actual experiments. Use your results to get an early idea of the market, to detect and qualify niches within that market, and to gain a broad idea of whether you should commit effort to that market. We use qualitative results to stay smart and aware and to avoid missing an important piece of information such as a disruptive trend (e.g., when you want to launch a camera service to capture racers while self-piloted tracking drones are emerging).

Potential Biases

False positive: Often due to a lack of specificity in your research. For instance, it is easy to get large numbers for potential users of an image-publication app, while the specificity of the service you have in mind (e.g., to protect privacy or to enforce copyrights) will drastically decrease the numbers.
False positives are also due to the scale of markets that are described by the survey you use. Most often, surveys describe wide international environments while you will tackle regional markets, or niches inside this market. The mechanisms that result in the described market may be different at your scale.
Confirmation bias: Often obtained by suddenly importing an unfounded ratio in your population estimate that actually make the result of the whole exercise fanciful. Indeed, you have to consider the size of the population you will actually acquire out of the target population, which depends on the competition (including indirect solutions) and your marketing channels. If you omit the conversion rate or use one that is whimsical, your results will be too optimistic. One of the goals of market research is to try to get a documented and realistic conversion rate. So it is important not to just figure out the size of a population having a given problem, but also to understand what part of this population is typically following such-and-such marketing channel, and what part will do so in the future.

Field Tips

When looking at available market surveys, take into account your product specificity - @tdagaeff
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Case Studies

Secondary Market Research versus Primary Market Research
Example: Association Providing Links for Business in a Specific Area - Queensland, Australia
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Tools

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References

Comprehension Test

Value Proposition Test - Broken Promise

Secondary Market Research

Secondary Market Research